Which of the Following Statements Is True of Convertible Bonds

question 42

Multiple Choice

Which of the following statements is true of convertible bonds?

• A) The most significant disadvantage to a corporation of issuing convertible bonds is that they increase the cash that the firm must use to make interest payments.
• B) The typical conversion ratio is set so that the firm's stock price must appreciate 5% or less before it is profitable for the holder to convert the bond to stock.
• C) Firms that issue convertible bonds can do so at a lower interest rate.
• D) The typical issue of convertible bonds allows the holder of the bond to convert it to preferred stock.

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Definitions:

Recognition Clause

A provision in a collective bargaining agreement that designates a specific union as the official representative of the workers.

Successorship Clause

A provision in a contract that ensures the continuation of the contract's terms when control of the business is transferred to a new owner.

Communication Clause

A provision in a contract or law that specifically relates to the methods and standards for communication between parties, often within the context of labor relations.

Blue Collar Workers

Employees who perform manual labor, often requiring skilled or unskilled physical work, typically in industries like manufacturing, construction, and maintenance.